ITC Q2 results preview: Profit may rise 7-10% YoY; cigarette volume growth likely at 5%

FMCG major ITC is expected to report 7-10 per cent rise in net profit for the September quarter on a low single-digit rise in sales. Cigarette volumes growth may moderate to 5-6 per cent compared with 8 per cent in June and 12 per cent in the March quarter, as the base normalises. Margins are seen expanding on a yearly basis amid a softening of raw-material prices, but may see some contraction sequentially.

ITC, said BOB Capital Markets, may log high-single-digit volume growth in cigarettes with strong double-digit growth and margin expansion in the FMCG segment. Hotels should continue to perform well led by higher occupancy and RevPAR, the brokerage said adding that the paper and paperboard business may perform well on both the growth and margin fronts, even as the revenue from the agri business may remain subdued.

This brokerage expects adjusted profit for ITC to jump 11.2 per cent YoY to Rs 5,138 crore. Sales are seen rising 3.9 per cent YoY to Rs 17,771.60. Margin is seen at 38.7 per cent against 38.9 per cent in June quarter and 34 per cent in the year-ago quarter.

Kotak Institutional Equities sees standalone profit for ITC at Rs 4,843 crore, up 8.4 per cent YoY. It sees revenue rising 4.6 per cent YoY to Rs 16,870 crore. It sees Ebitda margin at 37 per cent.

"We estimate 5 per cent YoY growth in cigarette volumes, translating into 10 per cent/8 per cent YoY growth in gross/net cigarette sales (versus 13 per cent/11 per cent gross/net growth in Q1). We expect cigarette EBIT growth of 8 per cent in line with revenue growth (akin to Q1)," the brokerage said.

Sharekhan said cigarette business revenue is expected to be up 9 per cent YoY, aided by 5-6 per cent volume growth, while the non-cigarette FMCG business is expected to grow at 15 per cent YoY. It expects The hotel business to grow 16 per cent YoY due to sustained demand. Paper business is expected to grow by 4 per cent YoY while the agri business is likely to log 10 per cent fall in revenues.

The domestic brokerage sees adjusted PAT for ITC at Rs 4,793 crore, up 7.3 per cent. It sees sales rising 1.2 per cent YoY at Rs 16,326 crore. JM Financial sees profit at Rs 4,847 crore, up 8.5 per cent.

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